Flexible choices

Quaker manager likes Celgene, Gilead, Medicines Co.

LOS ANGELES (CBS.MW) -- When Michael Sjostrom began sub-advising for Quaker's biotech health-care mutual fund last November, he aimed to create one that was more flexible than the others out there.

"It's really designed as a stock-picking fund, purely bottom up, which means we don't have a mandate to be invested at all times," said the manager of the $3 million Quaker Biotech, Pharma and Healthcare Fund
QBPAX

The fund, focuses on emerging midcap companies, is currently 30 to 35 percent cash and can take short positions up to 25 percent of assets.

The Quaker Biotech, Pharma and Healthcare Fund is up 5.9 percent year-to-date, beating a 2.8 percent gain for its peers and a 0.2 percent rise in the S&P 500.
SPX, +0.59%
As the fund isn't a year old, no other comparison data is available.

The fund makes choices based on a mix of business and financial elements, and scientific considerations. "We have access to a network of scientific consultants, which helps us out in the due diligence process," said Sjostrom.

Sjostrom's first pick is Celgene
CELG, +0.36%
which focuses on the treatment of vascular cancers. The company's key drug, Thalomid, is increasingly being used on solid tumors as well as vascular cancer, he noted.

"The most interesting thing is that they have follow-up compounds, which are a cleaner version of this particular drug. They should hit the market in late '04 or '05, which provides further upside to the company." Shares of Celegene finished down 26 cents at $26.04 on Wednesday.

Next up is Gilead Sciences
GILD, +0.94%
which specializes in virology, and has drugs on the market for HIV and influenza.

"The main driver here really is the sales of their HIV drug Viread. In short, the attractiveness of this drug resides in the fact that it is very easily used -- one pill per day. And there's a low incidence of resistance to the virus. It's a standard component in all HIV treatments and regimens and further upside for the drug, the company and the stock." Shares of Gilead closed down $1.63 at $41.34.

Finally, Sjostrom likes what he calls an "oddball in the biotech space," -- The Medicines Company
MDCO, +6.19%
which acquires, develops and commercializes late-stage development drugs. "They had licensed an antithrombotic from Biogen, redid clinical trials and got it (Angiomax) approved as one of the U.S. antithrombotic therapies," he said.

Clinical trials not only showed the drug is safer than Heparin, but proved it would result in significant cost savings for hospitals, he said "That's an important motivator for hospitals -- to make some extra money by using a safer more effective treatment," he said. Shares of The Medicines Company finished 2 cents lower at $18.01 on Wednesday.

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